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Edited version of your written advice
Authorisation Number: 1051378133771
Date of advice: 28 May 2018
Ruling
Subject: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 201X
The scheme commences on
1 July 201X
Relevant facts
The deceased acquired a dwelling (the dwelling)
The deceased passed away in 201X (The deceased)
The dwelling was the deceased’s main residence.
The title to the dwelling was in both the names of the deceased and the deceased’s former spouse.
The deceased obtained a certificate of divorce which took effect a number of years ago.
The dwelling was part of the property settlement and was to be transferred to the deceased however the title was not subsequently changed to reflect the change in ownership.
The trustee experienced delays in rectifying the title to the dwelling.
The updated title to the dwelling was issued and received by the trustee in 201X.
The dwelling was placed on the market and sold at auction in 201X.
The purchasers requested a longer than standard settlement period. Settlement occurred in 201X.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 118-130(3)
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time.
Detailed reasoning
The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death.
Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:
● Acquired by the deceased before 20 September 1985, or
● The deceased’s main residence when they died.
The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it.
In your case, the delay in disposing of the dwelling was due to the title to the dwelling not being updated to reflect the deceased as the sole owner of the dwelling. This delay prevented you from disposing of the dwelling within the two year time limit.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.